Simon Cook's vision for Esprit Capital Partners
Simon is something of an old-hand in venture, certainly by European standards. From 3i through Elderstreet to becoming "Chief Esprit", Simon has followed an interesting path, from being involved in CSR at 3i Cambridge in the early days to a nice 2004 $225M exit with Caz’s KVS. And no, he never played cricket for Kent. Here’s what our conversation delivered:
<– That’s Simon
Simon sees European venture entering a "perfect storm" and believes it will be a "hugely exciting asset class over the next 10 years". I hope he is right, because I certainly haven’t felt like showering myself with champagne in the last 5. The perfect storm results from a combination of
- lessons learnt, both by VC’s and entrepreneurs, leading to market maturity
- the Silicon Valley model having been firmly exported to Europe (meaning companies built to be global from day 1)
- mild competition levels compared with other venture markets (I think this latter point is true but only if you belong to the tier I)
Esprit seeks to emulate successful models (Simon kindly cites Atlas, Benchmark, "older" Silicon Valley firms as inspiration) focused on building real businesses, one at a time. "We got a bunch of people who have been slogging away at VC for over 10 years, some for 20" […] "and we are putting it all together in a team that understands what it takes to build companies and value over 5 to 7 years. It was great to see the buy-in from the ex 3i guys that we have on board today" [like Paul Murray or Stuart Chapman]. "We see ourselves as part of a tier I group of funds who really understand the business".
Esprit follows a model that is tried and tested (and that we at Atlas fully subscribe to):
- around $40-50m per partner,
- with no more than 5 "active" boards per partner
- with a 5-7 year exit horizon
"We want to hold on for a long as possible when we create value. CSR made 6-7X pre-IPO, another 5-6X post. you need these 30X returns to really shine". Hail hail !
Nice multiples, but Simon does not believe in (too much) hype: "we can be discrete like some of the old Valley money and make great returns fund after fund without necessarily being in the limelight, whilst leveraging the heritage of years of investment experience."
We also talked culture and team. The structure is flat, with all members of the team as partners and an open culture reflected in an open plan office. "We all talk and share ideas. The common expertise is around building growth companies". Esprit has an interesting team today with the combination of the early-stage techheads at Prelude and the more generalist profiles of Cazenove. Yet Simon is clear that, unlike other funds, they are not specializing around sectors more than necessary. And clearly when you look at the board seats you do get quite a spread of companies (Tom is involved with Lovefilm and Newnham, Catrina with Neteconomy and Powerlase). Instead they like to work on investment themes, such as
- "Location aware apps and tech": CPS (core tech), M-Spatial (location aware search), RoadAngel (in car navigation) fall in this group
- "Expanding the internet": Empower (IP / mobile messaging) and Xanadu (M2M communications) are examples
- "Go faster internet": Zeus (traffic efficiency), Polatis (next-gen switch), PacketExchange (IP transit and peering)
Really nice to see a credible team of people that has taken its independence, managed the transition to a younger team of partners well and joined forces with a respected early-stage investor. As the European market continues to mature, it will become harder for funds that are not specialized or have the reach of the likes of Esprit (and Atlas ;-)) to compete for top deals.
… AND NOW for something completely different; The Quiz. First person to comment on this blog with an answer to the following question wins a Road Angel courtesy of Simon (you will have to debate which model with him). The question is where does the name "Esprit" come from ? Clues: (a) one of the great British technological advances of the 1970’s and (b) spy. Easy !